Bloodbath in banking sector

April 29, 2021

LIVINGSTONE MARUFU

A bloodbath is beckoning in the banking sector with several local lenders eliminating jobs as part of drastic actions to curtail spiralling costs and rationalise their operations in a difficult operating environment.

The job carnage could turn to be worse in the second half of the year as more lenders are expected to put more employees on the chopping block in response to the realities of soaring costs, digitisation and Covid-19 pandemic, which have piled misery on the banks.

Zimbabwe Banks and Allied Workers Union assistant secretary general Shepherd Ngandu, sounded the alarm bells over the job carnage in the sector.

He expects more jobs to melt away due to downsizing and closure of branches across the country.

“Stanbic has so far laid off over 100 workers with 80 non-managerial staff retrenched and with over 20 managerial staff being retrenched.

“CBZ is also undertaking the (retrenchment) exercise and the other banks are expected to join in, (meaning) massive layoffs are expected this year,” Ngandu said.

It appears automation has taken over in the financial sector, giving banks a leeway to remain with a learner workforce.

Lenders are also battling rising impairments, leading to muted headline earnings, a situation which has given headaches to  bank executives.

A glance at local banks’ recent financial results shows the lenders have also suffered receding volumes and low profits.

Earnings have shrunk significantly across the sector.

The significant drop, especially in net interest income has been attributed to a significant reduction in interest rates to between 25% and 30% this year from 70% per annum in 2019.

The Reserve Bank of Zimbabwe reduced the lending rates as part of efforts to control speculative borrowing.

Consequently, low interest rates are shrinking banks’ net interest margins.

They have also affected the stability of the banking sector.

Experts said low interest rates tend to reduce banks’ resilience by reducing their profitability, including compressing net interest margins.

In addition to that, low interest rates tend to flatten the yield curve.

To compensate for their low interest income, the local lenders have hiked their transaction costs, leaving the bulk of depositors who are already living on the margins poorer.

The long-suffering depositors strongly feel, and rightfully so, that cash should be made available at affordable charges, on demand.

Now, the fear is the punitive bank charges could further diminish confidence in the turbulent financial services sector, which is critical in allocating resources in an economy.

Several analysts this week warned that the situation could also undermine efforts to encourage domestic savings and rebuild Zimbabwe’s shattered economy because the astronomical bank charges are eating into depositors’ already low incomes.

Due to the significant drop in incomes, lenders have been forced to retrench workers.

Ngandu told Business Times that Stanbic began with 32 voluntary retrenchments and 48 compulsory retrenchments.

In a letter addressed to workers by the bank, Stanbic Solomon Nyanhongo said in order to address the situation; the bank on February 16 2021 implemented a voluntary retrenchment exercise whereby the bank called upon employees willing to be retrenched on a voluntary basis to volunteer.

A window period giving employees an opportunity to volunteer was opened from February 16 2021 to February 23 2021.

Regrettably, the number of volunteers was not significant enough resulting in a situation whereby the bank went back to its original position before the introduction of the voluntary retrenchment exercise.

“Quite clearly, this situation whereby the bank currently has more employees than it requires is certainly not in the bank’s interest going forward.

 “It is against this background that the bank believes and is now of the view that involuntary retrenchment, regrettably, has to be embarked upon. Before deciding to embark upon this route, the bank has considered other options aimed at avoiding retrenchment including but not limited to transfer of employees to other departments and adoption of shift work,” Nyanhongo said.

“Regrettably, these measures are not workable considering the peculiar circumstances of the bank particularly the sensitivities thereof.”

On Friday last week, CBZ Holdings said there were mass layoffs at the country’s largest financial services provider.

“As we venture into a new and changing business model and new ways of work, we will inevitably need to review our current structures and operations. We acknowledge that they are some colleagues amongst us who may not be willing or able to undertake this journey of change and will be able to take the opportunity to pursue other interests,” the group said in a letter jointly signed by CEO Blessing Mudavanhu and chief human resources officer Nyasha Mutsai.

“We are therefore pleased to announce the offer of a voluntary severance package for any employees who are willingly, freely and voluntarily wish to consider pursuing opportunities outside of the organisation.”

Mudavanhu said all offers shall be considered and a response indicating the acceptance or decline shall be provided not later than May 18 2021.

Workers will get a notice pay for three months, some service pay for six months, positive leave days will be paid.

The bank shall pay medical aid bills for the next six months, funeral policy for six months.

Staff loans will become due and payable with housing loans being paid a minimum of 50% of the mortgage loan balance will be due and payable from the package upon exit.

The retrenchment exercise at CBZ will run up to May 9, 2021.

“Following the voluntary severance exercise, the organisation shall review any remaining positions which have been impacted by change in the way in which we do business,” CBZ said.

Upon the assessment of the voluntary retrenchment, the financial concern will also undertake a retrenchment exercise in June 2021 and will take place in liaison with the affected employees, workers committee and management committee and will be fully aligned to the legislative guidelines.

Bankers Association of Zimbabwe president, Ralph Watungwa, confirmed the mass layoffs in the sector saying banks were using different strategies to survive and retrenchment was one of them.

“It is unfair to give a helicopter view on this [layoffs] in the banking sector as each bank has its own strategies to survive.

However, we continue to have meetings as a sector which we carry out time and again to maintain the soundness of the sector and at the moment I can’t share with you the strategies we are putting in place,” Watungwa told Business Times.

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